Will more US natural gas to Europe help 'keep Putin in check'? Doubtful.

Republicans say faster approval of LNG export terminals could help check the influence of other suppliers, like Russia, and allow Europe to take a tougher diplomatic stance on Ukraine. Energy analysts say that would take years.

By , Staff writer

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    Pipelines running from the offshore docking station to four liquified natural gas (LNG) tanks at the Dominion Resources Inc. Liquified Natural Gas facility in Cove Point, Md., June 13, 2003.
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America and its European allies could take a tougher diplomatic stance against Russian President Vladimir Putin’s expansionism in Ukraine if Europe could tap US natural gas supplies instead of depending so heavily on Russia for winter heating fuel, Republican leaders in the US said this week.

To that end, House Speaker John Boehner of Ohio on Thursday urged President Obama to “keep Putin in check” and “help our allies in Europe” by expediting approval of new liquified natural gas (LNG) export terminals to get US gas supplies flowing to Europe.

It was virtually the same point Speaker Boehner made Wednesday, chastising Mr. Obama for foot-dragging on federal approval of LNG export terminals. While six LNG terminals have received US Department of Energy approval over the past three years, he said, another 24 applications are waiting to be evaluated.

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“By becoming a natural gas exporter, the US can supplant the influence of other exporters, like Russia and Iran, while strengthening … our allies and trading partners around the world,” Boehner argued Wednesday. “We can supplant Russia’s influence, but we won’t so long as we have to contend with the Energy Department’s achingly slow approval process.”

Radically boosting exports would raise US natural gas prices, warn critics of the Boehner position. Energy experts, meanwhile, say approving new LNG terminals would have zero effect on the current crisis – or any others for years to come.

“In recent years, US lawmakers have contemplated the role domestic natural gas supply could play in international affairs,” writes Kevin Book, an energy analyst with ClearView Energy Partners, an energy market research firm in Washington, in a Monday analysis. “Today, this notion remains an entirely theoretical construct.”

The problem, he says, is that any new LNG shipments from terminals along the Gulf of Mexico won’t be able to set sail before late 2015 or early 2016. Even if more export terminals are built, LNG will not necessarily go to Europe, even in a crisis, but to the highest bidder, which today is Asia, he notes.

Once the six new facilities are built, about 12 billion cubic feet of US-produced gas are expected to be shipped abroad. That does not include amounts from any newly approved facilities that, together, could create shortages and higher natural gas prices domestically, some experts warn.

One reason the Department of Energy is taking a go-slow approach to approving LNG export terminals is that each proposed facility must pass a “national interest” test that includes weighing its impact on domestic prices. Those who wish that the DOE would go even slower note that the department, in approving the first six LNG export terminals, used two studies that do not contain the most current data on price impacts and do not measure other key variables.

Count among them America’s largest industrial and manufacturing companies, which use large amounts of natural gas in production and are among those most wary of approving big new LNG export facilities.

“Exporting US natural gas increases domestic natural gas and electricity prices for every American and undermines manufacturing competitiveness and job creation,” Paul Cicio, president of the Industrial Energy Consumers of America (IECA), in wrote a letter Wednesday to Rep. Fred Upton (R) of Michigan, who was among several Republicans speaking out for LNG exports.

Natural gas prices for industrial users have soared this winter, amid high demand and pipeline constraints – and that was without any major LNG exports. If five approved-but-not-yet-built LNG export facilities had been operational, peak demand in January would have been about 10 percent higher and prices would have skyrocketed, the IECA wrote in a Feb. 6 letter to Energy Secretary Ernest Moniz.

Even so, others say, there are advantages to getting out from under the paw of the Russian energy bear. Russia has a track record of using energy as a political lever. European leaders no doubt recall Russia’s cutoff of gas supplies to Ukraine in January 2006, March 2008, and January 2009. In the latter case, a three-week break chopped Europe's supplies, too.

Russian gas currently makes up about one-third of Europe’s fuel supply. Would Mr. Putin use Russia’s energy as a political weapon in the Crimea crisis? Perhaps, although Russia’s desire to bring in cash and not to push its customers further toward other suppliers makes it seem unlikely, energy experts say.

Instead of exporting American-produced gas, the US should teach Ukraine how to recover the 40 trillion cubic feet of natural gas it has within its own borders, Mr. Cicio argues. Sharing hydraulic fracturing technology would spur growth and jobs within Ukraine and set it free from Russian energy hegemony, he writes.

Gas distribution companies represented by the American Gas Association (AGA), however, aren’t buying it. Concerns are overblown about the effect of LNG exports on domestic prices, they say.

“AGA has confidence in the expanding natural gas resource base and its ability to satisfy existing and new markets at very competitive prices,” says a statement on the AGA website. “We do not believe that US exports of natural gas will have a material impact on core LDC customers for the foreseeable future.”

New market demand is crucial in stimulating new production technologies and practices, the AGA argues. At the same time, substituting natural gas for coal and other fuels produces global environmental benefits.

“For these reasons,” the AGA continues, “we believe that natural gas, similar to other domestic commodities, should not be restricted in terms of exportation to foreign countries.”

[Editors Note: The original version of this article misstated the interest group that the American Gas Association represents. They represent gas distribution companies.]

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